Majority Voting in a Model of Means Testing

33 Pages Posted: 18 Jul 2018 Last revised: 22 Jun 2019

See all articles by Buly A. Cardak

Buly A. Cardak

La Trobe University - School of Economics

Gerhard Glomm

Indiana University Bloomington - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

B. Ravikumar

Federal Reserve Bank of Saint Louis

Date Written: 2018-06-01

Abstract

We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establish the existence of a sequential majority voting equilibrium and show that the means-testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size. Furthermore, the set of subsidy recipients does not depend on households' preferences, but depends only on income heterogeneity.

Keywords: Sequential majority voting, Means testing, Political support, Targeting

JEL Classification: D70, D72, H20

Suggested Citation

Cardak, Buly and Glomm, Gerhard and Ravikumar, B., Majority Voting in a Model of Means Testing (2018-06-01). FRB St. Louis Working Paper No. 2018-14. Available at SSRN: https://ssrn.com/abstract=3213844 or http://dx.doi.org/10.20955/wp.2018.014

Buly Cardak (Contact Author)

La Trobe University - School of Economics ( email )

Bundoora
Bundoora, Victoria 3083 3086
Australia
+61 3 9479 3419 (Phone)
+61 3 9479 1654 (Fax)

Gerhard Glomm

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States
812-855-7256 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

B. Ravikumar

Federal Reserve Bank of Saint Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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